Mobile, augmented reality games set to become dominant market forces by 2018

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UPDATE (10:13 pm, Pacific Time): Made some minor adjustments to stated figures at the request of the featured speaker.

SAUSALITO, Calif. — The inaugural GamesBeat Summit promised to delve into the bold ideas of gaming — and it kicked off with a bold prediction for the future of gaming revenue.

Tim Merel, the founder and managing director of financial advising firm Digi-Capital, opened up the event by forecasting a shift in market dominance. He anticipates revenue to increase by nearly $22 billion in the next three years, rising from an expected $88 billion this year to $110 billion at the end of 2018 — and by then, PC and consoles will be running second to mobile.

Thanks to the increasing market reach in Asia, the number of mobile products sold will reign over the gaming market. The Android operating system will also overtake Apple’s iOS, again due to the influence from Asian markets, especially China.

Above: According to Digi-Capital estimates, augmented reality and virtual reality will compete in a $150 billion industry by 2020.

Image Credit: Michael O'Donnell / VentureBeat

The revenue split between mobile operating systems is a tricky one to quantify, however. According to Merel and Digi-Capital’s Value Volume Index, the amount of downloads does not directly reflect the amount of sales. Given the difference in pricing structure and revenue sharing between OS holders and developers, it takes Google Play more than two downloads (and China Android more than a staggering eight downloads) to equal the monetary value of a single iOS download.

Merel also offered positive predictions for augmented and virtual reality’s place in the marketplace, estimating the shares of each in the year 2020. The physical technology-reliant virtual reality has — in its current state, according to Digi-Capital — an addressable market in the tens of millions when it comes to users, which is similar to home game consoles like the PlayStation 4. Augmented reality, on the other hand, has an addressable market more akin to smartphones, at hundreds of millions of potential users.

With these scopes in mind, Merel estimated that the two revenue streams would compete for around $150 billion in total possible revenue by 2020. Virtual reality should operate at around $30 billion of that market, with AR looking to take in the remaining $120 billion.